Entering text into the input field will update the search result below

Triumph Group: Modern Day Cigar Butt

May 03, 2018 10:50 AM ETTriumph Group, Inc. (TGI)5 Comments
China Enthusiast profile picture
China Enthusiast


  • TGI is trading at an excessively cheap valuation due to a few years of poor management.
  • Management changes in recent years are bringing back a much needed operational focus.
  • This new focus on execution has already begun to pay off and will enable the valuation to normalize as revenue growth returns and margins normalize.

Triumph Group (NYSE:TGI) has been selling off for the past few years due to several years of weak management and is trading at a valuation significantly below its peers as a result. Management changes and initiatives over the past two years have been dramatic and are on the cusp of making their way into the financials in a significant way. Triumph provides the opportunity to buy a mediocre business with great management trading at levels that are reflective of a poor business with terrible management. For this reason, it is reasonable to be bullish on the company as the market begins to reprice the equity to reflect the improvement in execution.

Triumph is essentially a conglomerate of small companies that each manufacture unique products for commercial and defense applications in the aviation industry. About 35% of revenue comes from products/services that are higher margin businesses due to the specialization and need for quality associated with them (These generally fall under the Integrated Systems and Product Support umbrella). The remainder of revenue comes from products with more commodity like characteristics that are sold to customers with significant negotiating leverage due to their size and thus generate low margins and returns on capital (These generally fall under the Precision Components and Aerospace Structures umbrella).

TGI's equity has been underperforming the market for the past 5 years for reasons that are well documented, but can be aptly summarized as incompetent leadership. Triumph embarked on a spree of acquisitions from 2010 to 2015 and failed to create value in these acquisitions. Poor expense management led to a deterioration in margins, and a lack of operational rigor led to a deterioration in customer relations. Northrop (NOC) placed Triumph on its no bid list and Boeing (BA) (a company responsible for ~35% of its sales) was

This article was written by

China Enthusiast profile picture
I am passionate about macroeconomics and financial markets. I focus on economic growth and inflation, and my view of those two variables drives my investment strategy.

Analyst’s Disclosure: I am/we are long TGI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (5)

the debt size really worries me.
Yanko Panayotkov Yanko Panayotkov profile picture
What is your prediction of stock price up to the end of the year...July October and December?
Thx for answer. 8,9,12
In the short term, revenues increases will rest largely on the number of bombardier wing deliveries. Long term, they need to win a new contract
Yorick profile picture
Love the title...that is how you hook readers in!
Kelvin Seetoh profile picture
Do you see their debt as a big issue?
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.